ASSISTING VICTIMS OF MORTGAGE FRAUD Goal To provide

ASSISTING VICTIMS OF MORTGAGE FRAUD

Goal To provide an overview of mortgage fraud and discuss ways to assist victims with recovery. Also highlight resources that are available for the field. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 2

Objectives Talk about the current state of the mortgage fraud industry Highlight research conducted by the National Crime Prevention Council Discuss common mortgage fraud scams and practices Learn strategies on how to assist victims Review resources available for the field © 2013 National Crime Prevention Council, Inc. www. ncpc. org 3

Facts and Figures © 2013 National Crime Prevention Council, Inc. www. ncpc. org 4

Mortgage Fraud Facts The Mortgage Asset Research Institute calls mortgage fraud “one of the fastest growing financial crimes in the history of the United States. ” Source: “Understanding Mortgage Fraud, ” Mortgage Asset Research Institute, available at www. mar Prosecutors consider mortgage fraud to be “among the most economically destructive crimes prosecuted by their offices. ” Source: www. Court. Innovation. org © 2013 National Crime Prevention Council, Inc. www. ncpc. org 5

Mortgage Fraud Facts- continued Mortgage fraud continues at elevated levels. Mortgage fraud has expanded to include other areas such as construction, finance, appraisal, brokerage, sales, and law. (FBI’s 2010 Mortgage Fraud Report Year in Review, www. fbi. gov) FY 12 mortgage fraud Suspicious Activity Reports: 70, 291 with losses of $2. 69 billion. (www. fbi. gov) © 2013 National Crime Prevention Council, Inc. www. ncpc. org 6

Mortgage Fraud Facts- continued The 2012 Mortgage Fraud Trends Report estimates the mortgage lending industry will originate $13 billion in loans containing fraudulent information, a $1 -billion increase over the 2011 and 2010 figures. (Source: Core. Logic) Pending investigations as of 3/31/13: 1, 954 with 72 percent involving losses of $1 million or more. (Source: www. fbi. gov) © 2013 National Crime Prevention Council, Inc. www. ncpc. org 7

States with Significant Mortgage Fraud Problems Florida Nevada Arizona Michigan Rhode Island Georgia California Illinois New Jersey New York Source: Lexis. Nexis 14 th Annual Mortgage Fraud Report © 2013 National Crime Prevention Council, Inc. www. ncpc. org 8

NCPC Mortgage Fraud July 2010 Survey © 2013 National Crime Prevention Council, Inc. www. ncpc. org 9

NCPC Mortgage Fraud Survey Ø Only 51% of respondents said they worked with a licensed real estate professional or lawyer. While only 38% made any attempt (even asked) to validate a license when purchasing a home. Ø Percent of those who researched thoroughly: § § § § Mortgage company/lender 24% Realtor 13% Loan Officer 8% Attorney/Lawyer 5% Appraiser 4% Home Inspector 4% Title Company 3% © 2013 National Crime Prevention Council, Inc. www. ncpc. org 10

NCPC Mortgage Fraud Survey (continued) Ø One in five consumers (20%) felt they were being scammed during the home buying process. ØAbout half of those “scammed” claim they were aware of scams and schemes prior to starting the process. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 11

NCPC Mortgage Fraud Survey (continued) ØOnly 61% say they always read contracts carefully, including the fine print, before signing. Ø 46% say they are cautious and suspicious. Ø 27% are both trusting and cautious. Ø 24% say they are trusting and friendly when it comes to the way they deal with people they don’t know. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 12

NCPC Mortgage Fraud Survey (continued) Ø 24% agree that they quickly read through contracts so they can sign on the bottom line and be done with the process. Ø 20% agree that they will occasionally overlook warning signs or concerns about sales facts if they think it will benefit them in the end. Ø 11% agree that they fall for sales messages that sound too good to be true. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 13

NCPC Mortgage Fraud Survey (continued) What is happening in the marketplace? Ø 19% said promises were not in written form. Ø 16% said promises were made verbally. Ø 12% were offered “government approved” or “official government” loan modification programs. Ø 11% were asked to wire money or write a check before contracts were signed. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 14

NCPC Mortgage Fraud Survey (continued) § 9% were asked to pay a fee in advance to work with their lender to modify/refinance/reinstate their mortgages. § 7% were required to allow their lenders to have direct access to their bank accounts or credit cards for payment purposes. § 7% were guaranteed by someone that they could stop a foreclosure or modify a loan. § 10% claim that undue pressures/tactics were used to make them “act immediately” on an offer. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 15

Understanding Mortgage Fraud © 2013 National Crime Prevention Council, Inc. www. ncpc. org 16

Common Mortgage Fraud Schemes Inflated income or assets Identity theft Altered documents Multiple loans Inflated deposits and soft second mortgages Inflated appraisal Flipping © 2013 National Crime Prevention Council, Inc. www. ncpc. org 17

Inflated Income or Assets A borrower who overstates his income or borrows the down payment without revealing the obligation to repay it. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 18

Identity Theft Involves, for example, a false Social Security number stolen from a person with good credit to verify that the person has authority to sell the home or borrow money. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 19

Altered Documents can include W-2 forms, bank statements, title commitments, leases, tax returns, or employment verification forms. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 20

Multiple Loans Multiple loans obtained during what is known as the “gap period” when new deeds and missed loan payments aren’t publicly available for inspection. During the gap, borrowers can close two or three loans with different lenders who, because of the gap, are ignorant of the other transactions on the very same property. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 21

Inflated Deposits / Second Loans Involves a buyer who gives a false purchase agreement to the lender, showing a false money deposit and an inflated purchase price. A buyer and seller who inflate the purchase price and offer seller financing in lieu of a down payment so that the buyer can obtain a larger loan than would be permitted by the lender’s underwriting standards. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 22

Inflated Appraisal An appraiser inflates the value of a property to generate a loan that exceeds the home’s true market value. Inflated appraisals frequently play a role in flipping schemes. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 23

Flipping A newly purchased property is immediately re-sold for an unjustifiably high price. Typically, the buyer and seller have a hidden relationship. Flips often rely on the assistance of a complicit appraiser, who issues an inflated appraisal or a false title insurance commitment. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 24

Predatory Lending © 2013 National Crime Prevention Council, Inc. www. ncpc. org 25

Predatory Lending Predatory lending describes unfair, deceptive, or fraudulent practices of some lenders during the loan origination process. The FDIC broadly defines predatory lending as "imposing unfair and abusive loan terms on borrowers. ” © 2013 National Crime Prevention Council, Inc. www. ncpc. org 26

Predatory Lending (continued) Lenders may be accused of tricking a borrower into believing that an interest rate is lower than it actually is, or that the borrower's ability to pay is greater than it actually is. The lender, or others as agents of the lender, may well profit from repossession or foreclosure upon the collateral. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 27

Predatory Lending (continued) Predatory lending should not to be confused with predatory mortgage serving. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 28

Negative Equity Loans © 2013 National Crime Prevention Council, Inc. www. ncpc. org 29

Negative Equity Loans These loans can occur when the value of the asset stays fixed but the loan balance increases because loan payments are less than the interest, a situation known as negative amortization. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 30

Balloon Loan Payments © 2013 National Crime Prevention Council, Inc. www. ncpc. org 31

Balloon Payments A short-term mortgage with small monthly installments and a large lump sum due at the end of the loan term An example would be a 30 -year loan due in 15 years. It amortizes like a 30 -year fixed, but is due 15 years earlier. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 32

Stated Income Loans © 2013 National Crime Prevention Council, Inc. www. ncpc. org 33

Stated Income Loan A stated income loan application is done by the borrower. No proof of income is needed. When the broker files the loan, he or she has to go by whatever income is stated. This opens the doors for borrowers to be approved for loans that they otherwise would not qualify for or could afford. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 34

Stated Income Loan (continued) Several commentators have challenged the notion of "predatory borrowing, " accusing those making this argument as being apologists for the lack of lending standards and other excesses during the credit bubble. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 35

Mortgage Fraud The Federal Truth in Lending Act requires certain disclosures of APR and loan terms. Also, in 1994 section 32 of the Truth in Lending Act, entitled the Home Ownership and Equity Protection Act of 1994, was created. This law is devoted to identifying certain high-cost, potentially predatory mortgage loans and reining in their terms. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 36

Fueling Mortgage Fraud Some of the most used factors fueling mortgage fraud are ◦ The diversion of law enforcement resources from white collar crime to the fight against terrorism ◦ The loosening of lending standards Source: Understanding Mortgage Fraud, ” Mortgage Asset Research Institute, www. marisolutions. com/mortgage-fraud. asp © 2013 National Crime Prevention Council, Inc. www. ncpc. org 37

Fueling Mortgage Fraud (continued) Some of the most used factors fueling mortgage fraud are ◦ The increased use of the Internet and other technologies that make the loan application process “faceless” ◦ The issuance of sub-prime mortgages, essentially loans to riskier borrowers © 2013 National Crime Prevention Council, Inc. www. ncpc. org 38

How Victims of Mortgage Fraud Can Obtain Help © 2013 National Crime Prevention Council, Inc. www. ncpc. org 39

Help for Victims of Mortgage Fraud The Fraud Enforcement and Recovery Act, passed by Congress and signed by President Barack Obama in May 2009, allocates $490 million over two years to increase the number of Justice Department prosecutors and investigators handling mortgage fraud cases. It enlarged the department’s criminal, civil and tax divisions; and enlarges the FBI mortgage-fraud task forces. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 40

Help for Victims of Mortgage Fraud (continued) To assist victims to begin the steps to recovery REPORT IT: www. stopfraud. gov www. preventloanscams. org 1 -800 -CALLFBI © 2013 National Crime Prevention Council, Inc. www. ncpc. org 41

Help for Victims of Mortgage Fraud (continued) To assist victims to begin the steps to recovery HUD Approved Housing Counseling Agencies Call: 1 -800 -347 -3735 HUD Office of Inspector General Email hotline@hudoig. gov Website: www. hud. gov/offices/hsg/sfh/hcc/hcs. cfm © 2013 National Crime Prevention Council, Inc. www. ncpc. org 42

Help for Victims of Mortgage Fraud (continued) To assist victims to begin the steps to recovery HOPE Now Alliance Call: 1 -888 -995 -HOPE for free counseling services Website: www. preventloanscams. org Neighbor. Works America Website: www. nw. org © 2013 National Crime Prevention Council, Inc. www. ncpc. org 43

QUESTIONS AND ANSWERS © 2013 National Crime Prevention Council, Inc. www. ncpc. org 44

Mortgage Fraud Additional Resources © 2013 National Crime Prevention Council, Inc. www. ncpc. org 45

Resources from the National Crime Prevention Council www. ncpc. org/mortgagefraud Mortgage fraud toolkit Reproducible outreach tools Recorded podcast interviews and webinars Public service announcements © 2013 National Crime Prevention Council, Inc. www. ncpc. org 46

Financial Fraud Enforcement Taskforce Website: www. stopfraud. gov Email: ffetf@usdoj. gov President Obama established the Financial Fraud Enforcement Task Force in November 2009 to hold accountable those who helped bring about the last financial crisis and those who would attempt to take advantage of the efforts at economic recovery. It consists of more than 20 federal agencies, 94 U. S. Attorneys Offices and state and local partners. It’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. © 2013 National Crime Prevention Council, Inc. www. ncpc. org 47

Report Scams and Make Complaints Consumer Financial Protection Bureau Website: www. consumerfinance. gov (complaint form) Phone: 855 -411 -CFPB (2372) Loan Modification Scam Prevention Network Website: www. preventloanscams. org; http: //complaint. preventloanscams. org (complaint form) Phone: 888 -995 -HOPE © 2013 National Crime Prevention Council, Inc. www. ncpc. org 48

Report Scams and Make Complaints (continued) Federal Bureau of Investigation Phone: 800 -CALLFBI (225 -5324) Online Tips: FBI Tips and Public Leads Form To file a complaint with the FBI contact the nearest FBI field office. Locations are listed at www. fbi. gov/contactus. htm or https: //tips. fbi. gov/ or for major cases you can also report information by calling tollfree number 800 -CALLFBI (225 -5324). © 2013 National Crime Prevention Council, Inc. www. ncpc. org 49

Report Scams and Make Complaints (continued) Housing and Urban Development (HUD) Office of the Inspector General Hotline Phone: 800 -347 -3735 Fax: 202 -708 -4829 Email: hotline@hudoig. gov Address: HUD OIG Hotline (GFI), 451 7 th Street, SW, Washington, DC 20410 © 2013 National Crime Prevention Council, Inc. www. ncpc. org 50

Report Scams and Make Complaints (continued) Federal Trade Commission Website: www. ftccomplaintassistant. gov Phone (for complaints against companies, organizations, or business practices): 877 -FTC-HELP (382 -4357) Phone (for complaints about identity theft): 877 -ID-THEFT (438 -4338) © 2013 National Crime Prevention Council, Inc. www. ncpc. org 51

General Information and Counseling Consumer Financial Protection Bureau Website: www. consumerfinance. gov Phone: 855 -411 -CFPB (2372) Financial Fraud Enforcement Task Force Website: www. stopfraud. gov/protectmortgage. html Phone: 202 -514 -2000 Email: ffetf@usdoj. gov © 2013 National Crime Prevention Council, Inc. www. ncpc. org 52

General Information and Counseling (continued) Federal Bureau of Investigation Website: www. fbi. gov/aboutus/investigate/white_collar/mortgagefraud/mortgage_fraud Phone: 800 -CALLFBI (225 -5324) Federal Trade Commission Website: www. ftc. gov/bcp/edu/microsites/moneymatter s/your-home. shtml © 2013 National Crime Prevention Council, Inc. www. ncpc. org 53

General Information and Counseling (continued) HOPE NOW Alliance Counseling Organizations Website: www. hopenow. com Phone: 888 -995 -HOPE (4673) Making Home Affordable from the Departments of Treasury and Housing and Urban Development Website: www. makinghomeaffordable. gov Phone: 888 -995 -HOPE (4673) or for hearing impaired 877 -304 -9709 © 2013 National Crime Prevention Council, Inc. www. ncpc. org 54

General Information and Counseling (continued) Loan Modification Scam Prevention Network Website: www. preventloanscams. org Phone: 866 -459 -2162 © 2013 National Crime Prevention Council, Inc. www. ncpc. org 55

Additional Resources Home Loan Learning Center by the Mortgage Bankers Association Website: www. homeloanlearningcenter. com Phone: 800 -793 -6222 Home Ownership Preservation Foundation Website: www. 995 hope. org Phone: 888 -995 -HOPE (4673) © 2013 National Crime Prevention Council, Inc. www. ncpc. org 56

Additional Resources (continued) Loan Modification Scam Alert Website: www. loanscamalert. org Phone: 888 -995 -HOPE (4673) Neighbor. Works America Website: www. nw. org Phone: 202 -220 -2300 © 2013 National Crime Prevention Council, Inc. www. ncpc. org 57

For more information U. S. Department of Justice National Crime Prevention Council Office for Victims of Crime 2100 Jefferson Davis Highway 810 Seventh Street NW Suite 901 Eighth Floor Arlington, VA 22202 Washington, DC 20531 Phone: 202 -466 -6272 Phone: 202 -307 -5983 Fax: 202 -296 -1356 Fax: 202 -514 -6383 www. ncpc. org/mortgagefraud www. ovc. gov © 2013 National Crime Prevention Council, Inc. www. ncpc. org 58